UPDATE: Infrastructure the winner in Spending Review

Transport spending will increase to £9.5 billion in 2015/16 under plans unveiled by Chancellor George Osborne in this week’s Spending Review.

This equates to a £600 million rise in the Department for Transport’s capital budget compared to 2014/15. Money will be spent on delivering new road projects as well as supporting investment in the rail network.

It was also announced that £50bn will be spent on infrastructure capital investment in 2015/16. This is at the same level as last year.

The Chancellor labelled his infrastructure plan ‘game changing’ as he revealed that £100bn would be spent on a long-term infrastructure investment programme. Chief secretary to the treasury, Danny Alexander, will provide details of the specific infrastructure projects due to be awarded cash tomorrow (27 June).

Osborne said: “Today we raise our national game. That means £300bn capital spending guaranteed to the end of this decade.

“We are already massively expanding investment on road schemes. This is the largest programme of investment in our roads for half a century. We’re committing to the largest investment in railways since the Victorian era.”

As expected, Osborne gave the green light to funding for HS2 and set out plans to take forward the second stage of Crossrail – which will connect north and south London.

It wasn’t all good news for transport with the DfT facing a 9% reduction in day-to-day spending.

And Osborne revealed a fresh round of £11.5bn in spending cuts as he attempts to reduce the structural deficit.

Reaction:

Stephen Palmer, CEO of the Institute of Highway Engineers, said: “Highway engineers are already hard pressed to keep the UK’s highways network functioning under existing budget constraints. A further 10% cut on top of the recent front loaded cuts to local authority budgets coupled with a £300 million (9%) cut to DfT budgets in 2015 will inevitably mean even less funding for local transport schemes and road maintenance budgets cut further. Whilst the 5.5% increase in transport capital investment is welcomed, we await the detail of ‘Investing in Britain’s Future’ document to see how investment in new highway infrastructure will be handled. We simply cannot continue to keep building up the maintenance bill for tomorrow’s generation. A defined funding plan to bring the network to a satisfactory condition is long overdue particularly when the business case for timely maintenance is proven with returns of up to 7:1.”

Institution of Civil Engineers (ICE) director general, Nick Baveystock, said: “The severe infrastructure investment cuts made in the 2010 spending review have begun to bite and are undermining the sector’s ability to stimulate growth or job creation, so we are encouraged to see a review with actual infrastructure investment at its heart. The increase in capital expenditure and funding certainty for key programmes appears to be positive news and could provide a platform for the industry to deliver on national needs more effectively.

“It is however, not all good news for infrastructure. Departmental cuts will inevitably place further pressure on local authority budgets, with road maintenance likely to suffer the brunt. The poor condition of many local roads is a drag on the economy and the reactive “quick fix” approach to maintenance is costly. Local authorities must increase efficiency and make the transition to cost efficient, planned maintenance going forwards. But first and foremost, we need a focussed, joint central and local government programme to finally clear the backlog.”

James Hookham, Freight Transport Association’s managing director – policy and communications, said: “We welcome the additional funding for infrastructure projects announced today, and are anxious to work with the Government to make sure it is invested in those projects on which economic recovery depends. The Chancellor is right to recognise that transport investment is key to the economic recovery; however it is vital that the money made available today is put to work in the right places to deliver the biggest possible benefit to the country. Our list of trade routes, which has been supplied to the treasury, maps where these priorities are in the country.”

Chartered Institution of Highways & Transportation chief executive, Sue Percy, said: “CIHT welcome the recognition that infrastructure investment is a driver of economic growth. Transport infrastructure is vital to the whole spectrum of society. The UK must develop an integrated long term transport infrastructure investment strategy. To achieve success the strategy must have cross-party agreement and look beyond the political cycle to a 20 year timeframe.”

“CIHT believe that the strategy must identify new ways of financing the development of new and existing transport infrastructure across the UK. Adopting a long term strategy that sits above the political cycle would allow investors to have more confidence in investing in infrastructure. The Chancellor should continue to seek opportunities for more infrastructure investment to generate even greater benefits.

“Whilst we welcome the focus on major infrastructure, CIHT has concerns with the reduction of 9.3% for the Department for Transport everyday budget and the impact this will have on local transport schemes and the maintenance of the local road network.

“CIHT believes that local authorities need increased investment to address their highways maintenance backlog. Failure to address deteriorating assets will result in much higher costs to rectify the problems in the future. The long-term cost of maintaining the network could be significantly reduced by taking forward intensive improvements to local roads.”